Two Chinese nationals are facing 15 years in federal prison after pleading guilty in court to charges of attempting to obtain seven Maritime Raiding Craft and eight multi-fuel outboard engines and export them to China via a Hong Kong shell company, according to a recent Justice Department press release.

The two Chinese approached Gravious Aluminium Boats LLC, which operates under the name “Metal Shark” and attempted to procure seven of its 40ft Defiant model boats which have a military application. The Chinese buyers specced out the boats with eight Evinrude E-Tec G2 outboards. These are multi-fuel engines able to burn diesel, jet fuel (JP-4, JP-5, JP-8 Jet-A, and Jet-B), kerosene, biodiesel, and gasoline. They are hardened engines that can be dropped from aircraft or launched from submerged submarines. They have been in use by U.S. Special Operations Forces and are considered a Prohibited Export Item by the U.S. government.

The scheme was not very sophisticated. Ge Songtao, a Chinese national, used a female, U.S.-based employee named Yang Yang to approach Metal Shark and purchase the all-metal Defiant boats. Yang rejected the cheaper gas engines, which were standard equipment, and demanded the far more advanced Evinrudes. Instead of disclosing that the boats and engines would be going to Shanghai China, Yang falsely told the manufacturer that the items were being bought by a different one, a shell corporation set up in Hong Kong. Meanwhile back in Shanghai, Songtao moved a $110,000 deposit to a Hong Kong-based company which then paid Metal Shark and arranged for an agent to receive the boats, when they would arrive in Hong Kong, and transship them to China. Like it was routine. Yet, Metal Shark routinely reports the engines’ sale requests to the U.S. Department of Commerce for approval.

The Department of Commerce flagged the purchase request and looked into the purported buyer in Hong Kong. That ended up becoming a two-year, multi-service investigation conducted by the FBI, the U.S. Naval Criminal Investigative Service, the U.S. Department of Commerce – Bureau of Industry and Security, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.

Lt. Fang briefing Saudis aboard a P-8 Poseidon in 2018. (Photo by MCS2 Jakob Vandahlen/U.S. Navy)

If you are wondering why the Navy’s Criminal Investigative Service was involved in this case, it’s because Yang Yang is married to a U.S. Naval Officer, Lt. Fang Yang.

Lt. Yang was assigned to the Maritime Patrol Reconnaissance Weapons School at Naval Air Station Jacksonville. This school trains aircrews on the P-8 Poseidon Maritime Patrol and Anti-Submarine Warfare platform. Lt Yang is now facing his own raft of charges under the UCMJ. Among the charges is procuring a firearm for the use of Ge Songtao while in the U.S. and for operating a consulting business in partnership with Songtao for the purpose of exporting equipment and material to China.

Military/Industrial Espionage basically.

This case was significant enough for the FBI to seek a FISA warrant (no doubt in part to protect classified information entered as evidence in the court record).